updated 11:20 pm EDT, Thu August 17, 2006

Apple finds labor abuses

Apple on Thursday said it has found evidence that one of its iPod suppliers has violated its own Supplier Code of Conduct. Earlier this summer, the company began an investigation following reports of labor abuse by its iPod manufacturing partner Foxconn. Recent reports also indicated that Apple look to Foxconn for additional laptop production. Apple said its audit team--comprised of members from is human resources, legal, and operations groups--found that Foxconn was in compliance in the majority of the areas audited, but found violations to the company's Supplier Code of Conduct, including overcrowding in some housing provided to workers, a complex and overly incentivized pay structure, an outdated payroll system, over-worked employees, and some instances of harsh treatment. In addition, Apple found other areas for improvement, which it said it as working to address. While Apple said it has been encourage by steps already taken by Foxconn, it will continue to monitor the conditions as well as conduct an audit of all its iPod and Mac manufacturing partners by the end of the year.

Apple's investigation found evidence of overcrowding in some of Foxconn's off-site leased dorms where workers were found to be "triple bunked" in one location and "too impersonal" in two other off-site locations; the company's on-site dormitories, which were optional, did not have the problems. Apple said that the iPod manufacturer has acquired additional land and is currently building new dormitories, noting that the plans were in place prior to Apple's audit. The newly procured housing space increase the total living space by 46 percent during the next four months.

"Our audit of on-site dormitories found no violations of our Code of Conduct. We were not satisfied, however, with the living conditions of three of the off-site leased dorms that we visited," Apple wrote in its open letter posted to its website.

"These buildings were converted by the supplier during a period of rapid growth and have served as interim housing. Two of the dormitories, originally built as factories, now contain a large number of beds and lockers in an open space, and from our perspective, felt too impersonal. The third contained triple-bunks, which in our opinion didn't provide reasonable personal space."

Apple, however, found some evidence of harsh treatment of workers. Two employees reported that they had been disciplined by being made to stand at attention. While the issue was being addressed and appeared to not be widespread, Apple said it was quickly working to better educate plant management about its Code of Conduct.

"While we did not find this practice to be widespread, Apple has a zero tolerance policy for any instance, isolated or not, of any treatment of workers that could be interpreted as harsh," Apple said. The supplier, it claims, has launched an aggressive manager and employee training program to ensure such behavior does not occur in the future.

Payroll to be improved

Apple also found that the workers were subject to an overly complex payroll system, but said that all workers earn at least the local minimum wage and were given a comprehensive medical plan. In fact, the sample audit of payroll records showed that more than half were earning above minimum wage, according to Apple. However, the manual payroll system provided for little dispute resolution and the complex incentives for workers effectively violated its own supplier code, Apple said.

"We did find, however, that the pay structure was unnecessarily complex. An employee's wage was comprised of several elements (base pay, skill bonus, attendance bonus, housing allowance, meal allowance, overtime), making it difficult to understand and communicate to employees," Apple wrote. "This structure effectively failed to meet our Code of Conduct requirement that how workers are paid must be clearly conveyed. The supplier has since implemented a simplified pay structure that meets the Code of Conduct."

Apple said Foxconn was working to have a better solution in place by October 1 of 2006 that would link its payroll system and electronic badge system to automate the recording of hours worked and pay calculations.

Overtime violations

The investigation also found evidence of over-worked employees. Despite claims that plant workers could decline overtime requests without penalty, it found that over 35 percent of the iPod plant employees worked more than the 60-hour per week limit mandated by Apple's supplier code and employees worked more than six consecutive days 25 percent of the time. Apple's Code of Conduct requires that employees work no more than 6 days per week.

New policies were put into place to more effectively communicate the required policies to supervisors and managers at the iPod plan and a new management system has been implemented to track compliance with the Code of Conduct, according to Apple.

The letter also noted some employee dissatisfaction with the lack of overtime during non-peak periods and the transportation schedule for employees living in off-campus dorms.

Apple to complete more audits

Despite the violations, Foxconn appeared to be in compliance with a vast majority of Apple's Code of Conduct, according to the letter; however, Apple was looking for longer-term preventative solutions to help its partners improve the existing work conditions.

The company also said that it has engaged the services of Verité, a leader in workplace standards, to help it complete audits of other aspects of the work conditions, including health and safety. Apple will also complete audits of all final assembly suppliers of Mac and iPod products in 2006.

"We recognize that monitoring compliance is an ongoing process requiring continual progress reviews. When violations are discovered in any supplier, we will require corrective action plans, with a focus on prevention and systemic solutions," Apple's statement read.

"We will also ensure that action plans are implemented and in cases where a supplier's efforts in this area do not meet our expectations, their contracts will be terminated.

Apple also noted that it has now joined the Electronic Industry Code of Conduct (EICC) Implementation Group, which has established industry-wide standards and offers resources for evaluating suppliers. Apple said it would help make contributions to the EICC, which was a key benchmark when Apple created its own Code of Conduct.

good on ya Apple

wow...

My respect for Apple has grown even more. Like all companies, Apple's is in the business of making money, yet these decisions will cost Apple in the long run. Thank you Apple for making my next iPod purchase guilt free.

huh?

Mine hasn't grown. I've been a Mac user since the early 90s and I'm shocked that Apple would legitimize and formally recognize a 60 hour work week for its suppliers' employees. It's good that Apple found and stopped the most abusive rules being applied to the workers, but a recognized 60 hour work week? This is 2006.

Probably not.

They already had the agreement with FoxConn to uphold these Conduct rules. This will probably come out of the bottom line of FoxConn and not Apple. If apple finds gross violations in the future and they move their business to another company because of it, then I will be impressed.

What?

I thought all the posters on these boards said there was nothing wrong at Foxconn? What's next? Are they going to admit apple could actually learn to listen to consumers and offer computers they want at more price points?